China’s Rising Defence Expenditure and Implications for India

Brig (Retd) Gurmeet Kanwal, 

Visiting Fellow, VIF

While India’s interim defence budget for the financial year (FY) 2014-15 has remained stagnant in terms of the Rupee-Dollar exchange rate and inflation, the People’s Liberation Army (PLA) of China has been given a 12.2 per cent increase over the previous year in planned defence expenditure to US$ 131.57 billion (Yuan 808.23 billion).

China’s annual defence expenditure has been growing at double digit rates over the last decade. The latest hike is a clear signal from the new regime led by Xi Jinping and Li Keqiang that China will continue its strident march towards becoming the pre-eminent military power in Asia and that its military assertiveness will continue while dealing with territorial disputes.

Premier Li Keqiang told the National People’s Congress, the government would "strengthen research on national defence and the development of new- and high-technology weapons and equipment" and "enhance border, coastal and air defences... We will comprehensively enhance the revolutionary nature of the Chinese armed forces, further modernise them and upgrade their performance, and continue to raise their deterrence and combat capabilities in the information age."

Chinese analysts often seek to justify the steep annual hikes in the defence outlay as having been “caused by the sharp increase in the wages, living expenses and pensions of 2.3 million PLA officers, civilian personnel, soldiers and army retirees.” However, defence analysts look at the spectacular anti-satellite test successfully conducted by China in January 2007, pictures of an aircraft carrier – the Liaoning – undergoing sea trials, the acquisition of SU-30 fighter-bombers and air-to-air refuelling capability, the development of anti-ship ballistic missiles and a growing footprint in the South China and East China Seas, and cannot help wonder whether a 21st century arms race has well and truly begun.

In the 2004 and 2006 White Papers on National Defence, the Chinese government had stated that additional funds were needed for modernisation of the PLA. The allocation of additional funds for force re-structuring and a qualitative increase in the levels of training is emphasised in both the White Papers, as also rising inflation as a cause of increased defence expenditure. However, nothing in the recent White Papers fully explains the double-digit inflation-adjusted growth in the annual defence expenditure. It is this lack of transparency that has fuelled speculation about an arms race.

Complete transparency in defence spending has seldom been a strong point even among countries that take pride in being liberal democracies. According to the late Air Cmde Jasjit Singh: “All countries try and protect what they consider to be crucial information about their defence capability for understandable reasons; and defence expenditures are obviously part of that information except where democratic states practice greater transparency as part of their liberal ethos, domestic obligations and public oversight, and well established procedures of accountability...” Totalitarian regimes like the one in China lack egalitarian accounting practices and do not have a real grip on all the details of what they actually spend.

China’s actual military expenditure is far higher than the officially published figure. This year it is expected to cross US$ 200 billion. David Shambaugh, a well-known China analyst, finds China’s defence budget the most difficult aspect of the country’s armed forces to research. In his view, “Few areas of China’s military affairs are more opaque and difficult to research than the revenue/ expenditure and budget/ finance domains – but perhaps none is more important to understand.” In response to international calls for greater openness, one Chinese military official wrote: “Transparency is a tool of the strong to be used against the weak.”

David Shambaugh lists several items of expenditure that do not figure in China’s official defence expenditure (ODE): “China’s official defence budget does not appear to include all funds for (1) Chinese-made weapons and equipment production (as distinct from procurement); (2) some RDT&E costs; (3) the paramilitary People’s Armed Police; (4) funds for special large weapons purchases from abroad; (5) funds directly allocated to military factories under the control of the GAD and funds for defence industry conversion; and (6) military aid.”

Ted Galen Carpenter and Justin Logan point out that greater transparency would be in China’s interest: “China needs to recognize that it gains little from opacity in comparison to what it loses… Any respectable observer of the People's Liberation Army knows about China's growing capabilities. We know about the Sovremenny destroyers, the Sunburn missiles and the Kilo submarines. We know about the Sukhoi 30s and the new F-10 fighter. Large-scale hardware acquisition and development is hard to hide.”

On certain parameters, China’s defence expenditure compares favourably with the other major powers. China’s ODE overtook that of Japan ($42 billion) and Germany ($37.5 billion) in 2007, but still lagged behind the United Kingdom ($62.38 billion) and France ($50.78 billion) whose economies are now much smaller than that of China. It is still a small fraction – less than one-fourth – of the United States' annual defence budget of $575.00 billion; not counting the supplementary grants of about US$ 75 to 80 billion sought by the Pentagon separately every year for the ongoing war (s). The United States spends almost half – 48 per cent – of the total defence budget of the world. China, France, Japan and the United Kingdom each spend four to five per cent of the world’s total defence expenditure. 

India must Solidify Ties with Japan for Growth, Moderating China

Kanwal Sibal, 

Dean, Centre for International Relations and Diplomacy, VIF

The visit of Japan’s royal couple to India, the first in the history of India-Japan relations, deserved greater attention by our media. The government did make special gestures to underline the visit’s importance, with the Prime Minister receiving the couple at the airport and the External Affairs Minister acting as the Minister-in-waiting. But the media did not amplify the government’s political signals, which a mature media with geopolitical sense should have.

Special

Our media gives excessive coverage to visits by the US President or Pakistani leaders, down to frivolous details of fashion and food. The coverage of the royal couple’s visit was muted by comparison, even though much could have been said about the exceptional dignity and grace of the guests. Perhaps the Japanese side may not have wanted to promote celebrity coverage of the visit, as that might have been incompatible with the relationship of respect and distance between the Japanese public and the royal couple. Nonetheless, we seemed to have lost the sense of the moment, as the visit of the Emperor and Empress of Japan- a 2600 years old monarchy- had special significance in historical terms.

The rising tensions between Japan and China unduly coloured the media commentary on the visit. No doubt India and Japan see a shared interest in dealing with the challenges posed by an increasingly assertive China. The visit of the royal couple coincided with China’s declaration of a new Air Defence Identification Zone (ADIZ) that covers the disputed Senkaku islands, which made the China dimension of the developing India-Japan strategic partnership more topical.

The Japanese political managers of the royal visit rightly did not want to narrow its purpose by overemphasising the China context. To avoid unnecessary China-baiting and put matters in perspective, they briefed the media on the comparative content of the Japan-China and the Japan-India relationships, showing dramatically how the latter is a pale shadow of the former. Japan’s $345 billion trade with China far surpasses the $18.5 billion trade with India. China is Japan’s largest trade partner, with Japan’s FDI there totalling $69 billion in 2011, as against its $ 15.9 billion total investment in India. 80,000 Chinese were studying in Japan in 2009 compared to India’s 541. Whatever the degree of deterioration in Japan-China ties, the stakes the two have in each other are enormous.

Japan has been Asia’s leading Asian power for long, regaining that position soon after its devastation during the second World War. For the last two decades, the Japanese economy, suffering from persistent deflation, has eroded Japan’s international standing, with the perceived failure of the Japanese economic model, the country’s fractious politics and the social challenges generated by its ageing population.

Disparity

During this period China has risen, becoming now the world’s second largest economy and the largest exporter too. Political pundits note that never in history have China and Japan risen together and that when one has been rising the other has been in decline, a point that even Chinese diplomats openly make.

Would this mean that if Prime Minister Shinzo Abe wants to revive Japan’s economy and its international status, putting Japan once again into an upward curve, he is inevitably putting his country into a collision course with China? Closer analysis will show that while Japan has been a formidable power economically, it has been politically undersized because of its defence dependence on the US and the post-war limitations imposed on its defence establishment constitutionally by the US. China’s exaggerated ventilating of its historical grievances about Japan is self-serving as it seeks to give political and moral justification for its actions that stoke tensions in the East China Sea.

It cannot be that China, a nuclear power with military muscle that aims at countering US power in the region through access denial capabilities, really feels threatened by Japan, even if Japanese armed forces cannot be trifled with. Its accusations that nationalism and militarism are being revived in Japan would have more credibility if China were not guilty of the same iniquity.

Need of the hour

Japan seems to be the sharp edge of China’s growing power struggle with the US. The strategic subjugation of Japan would be essential for the rollback of US power from the region. China’s provocations in the South China and East China seas, and now its ADIZ declaration, are calibrated moves to test US resolve, push it to temporise to protect its massive political and economic stakes in China and, in the process, gain more strategic space for itself. The objective is to weaken US hegemony in the region and replace it with China’s own hegemony.

The implications of China’s aggressive posture in the east are serious for us in the west as the forces driving Chinese policies are more important than their geographical expression at a point in time. China is currently presenting a relatively more conciliatory face to us, though it is also insidiously strengthening its territorial claims on Arunachal Pradesh by inventing new Tibetan names for it. We are inclined to assess China’s political conduct based less on its totality than on our bilateral engagement. China is actually not bereft of “soft-power” as even its adversaries, including India, are receptive to justifications for its unacceptable behaviour based on its narrative of past humiliations. China’s conduct towards Japan derives from its growing great power consciousness and the re-ordering of global equations that this must lead to in its view.

We have to face this reality as a rising Asian power. We must therefore solidify our relationship with Japan primarily for accelerating our own growth with injections of Japanese investments and technology, which will serve also to moderate China’s ambitions.